Neutral Citation Number: [2010] UKUT 105 (AAC)

Appeal No.  T/2009/528
IN THE UPPER TRIBUNAL		
ADMINISTRATIVE APPEALS CHAMBER
TRAFFIC COMMISSIONER APPEALS

ON APPEAL from the DECISION of Beverley Bell
Traffic Commissioner for the NORTH WEST TRAFFIC AREA
Dated 23 November 2009

Before:
Frances Burton, Judge of the Upper Tribunal
George Inch, Member of the Upper Tribunal
Stuart James, Member of the Upper Tribunal

Appellant:
			KHJ LIMITED

	 
Attendances:
For the Appellant: David and Ann Armer

Heard at:	Victory House
Date of hearing:	10 March 2010
Date of decision:	 7  April 2010

DECISION OF THE UPPER TRIBUNAL

IT IS HEREBY ORDERED that this appeal be DISMISSED and the order of the Traffic Commissioner will come into effect at 23.59 hours on Sunday 16 May 2010.

REASONS FOR DECISION

1.	This was an appeal from the Decision of the Traffic Commissioner for the North Western Traffic Area dated 23 November 2009 when she revoked the Appellant Company’s standard national operator’s licence authorising 10 vehicles and 10 trailers, held since 1992, under s.26(1)(c)(i) (convictions of the licence holder, a former director), s.26(1)(c)(ii) (convictions of the licence holder’s servants or agents), s.26(1)(e) (failure to comply with statement of intent), s.26(1)(f) (failure to observe undertaking to notify material changes and convictions) and s.27 (repute and professional competence) of the Goods Vehicle (Licensing of Operators) Act 1995. The former director and transport manager both also lost their repute and the Appellant Company was also disqualified from holding or obtaining an operator’s licence for 5 years from 1 January 2010.
2.	The factual background appears from the documents, the transcript of the public inquiry and the written Decision of the Traffic Commissioner and is as follows:
(i)	The Appellant company had previously been called CAW Ltd but had changed its name on 8 October 2008. David Armer had been a Director of the operator company since the grant of the licence. He had resigned on 23 July 2009. His wife Ann Armer had been a Director from April 2002. There had been 2 other Directors (Jennifer England and Peter Earley) until they had resigned on 31 July 2001. The nominated Transport Manager had been Joan Newton from 8 August 2001 at which time the TMI Form had stated that she would work 20 hours per week as Transport Manager, besides which she was also Transport Manager on her own licence (P&J Transport) authorised for 5 vehicles, where she worked 10 hours per week. She was at the same time working 16 hours per week as an employee of Bookers, which had risen to 36 hours by the date of the public inquiry which was convened on 22 October 2009. The Traffic Commissioner had not previously been aware of Mrs Newton’s employment by Bookers, and had taken exception to this when it was revealed at the public inquiry.
(ii)	The public inquiry was generated by convictions sustained by David Armer (Director) and Peter Newton (employee and husband of the Transport Manager) when they pleaded Guilty at Carlisle Crown Court on 2 June 2009 to conspiracy to obtain money transfers by deception and on 23 July 2009 were sentenced (in the case of David Armer) to 15 months imprisonment, disqualification for 4 years under s.2 of the Company Directors Disqualification Act 1986 and an order to pay £6,000 towards prosecution costs, and (in the case of Peter Newton) to 6 months imprisonment. Another employee (Donald Andrew Kershaw) also pleaded Guilty to the same charges and received 8 months imprisonment. The three Defendants had exaggerated the amounts of rubbish they had collected for Cumbria County Council from 31 August to 6 December 2006, and had supported the scam with false paperwork, including for vehicle loads which they had not undertaken, and had been able to do this as the County Council’s systems were so lax that they had been able to take advantage of this. As a result the call up letters had also raised financial standing besides those issues already set out in paragraph 1 above, and the Appellant company had been required to show available finance of £36,800. A maintenance investigation had meanwhile been conducted by VE Hirons on 2 September 2009 and had been satisfactory.
(iii)	At the public inquiry the Appellant company had been represented by Simon Newman, solicitor, of NA Commercial Solicitors and Mrs Armer and Mrs Newton had attended. VOSA was represented by VE Hirons. Mr Newton was not present as he was at a funeral, but a witness statement from him was available. Mr Armer was still in prison but to be released in 3 weeks time. No adjournment was requested.
(iv)	The evidence of VE Hirons was that he had found everything satisfactory on his unannounced visit on 2 September 2009 when he had met Mrs Newton who had confirmed that she was in control of the business as Transport Manager and CPC holder and that the Director was David Armer (there apparently having been no mention of the fact that he had resigned and Mrs Armer had been a Director since 2002).
(v)	Mrs Armer’s evidence was that, while she had been a Director since 2002. she had not been active until 23 July 2009 when her husband had been sent to prison. She had then had to take over running both the transport business KHJ Limited and a property business D&A Properties Limited. She was distressed throughout her evidence (which at one point had had to be adjourned so that she could compose herself) and said that she had been very shocked when her husband had pleaded Guilty and received a prison sentence as she had thought he was pleading Not Guilty. She said that in the transport business she relied heavily on Mrs Newton and on Ann Kirkwood, the Company Secretary, who also did much administration and paperwork. She stated that she visited the Appellant company twice a day, for at least an hour in the morning and a lesser period in the afternoon, and that at these times she spoke to David Jordan (the mechanic), Ann Kirkwood and Tony (the driver). There had also been a salesman but he had left 2 weeks previously. Tony the driver also helped in the garage as there was not much work for him to do.
(vi)	Mrs Armer had explained that since October 2008 the business had changed significantly. The assets of CAW Limited had been sold, as a result of which the name had been changed (a condition of the sale). CAW Limited had had a fleet of vehicles working constantly in skip hire, transport and scrap metal from 7 sites and employing nearly 100 staff as they operated waste disposal contracts for Cumbria County Council. They also had other contracts with companies such as BAE Systems, Vickers and Kimberley Clark, and did a lot of work for builders and domestic properties. As a result of the sale of the waste disposal assets to Waste Recycling Ltd (for £4.25 million) and the 3 Defendants’ Guilty pleas the Cumbria County Council sites had gone back to them. The Cumbria County Council work had been worth about 30% of the company’s business. Post October 2008 the company had been involved in plant hire and vehicle maintenance (although there was not a lot of work about from other operators at present) and the vehicles’ work was to take plant hire vehicles out to sites. There were 4 vehicles on the licence, 3 were 8 wheeled tippers which were doing a little work for D&A Properties, the building business, or were parked up as there was not much for them to do.
(vii)	Mrs Armer had contrived that when her husband came out of prison on 16 November 2009 she wanted him to take over running D&A Properties as she found it difficult to work with builders, while she built up KHJ Limited in which her son Henry would, she hoped, be able to help her. However, he had originally also been a Defendant to the criminal proceedings (which had been eventually dropped against him) and as a result had been on anti-depressants. She had been helped on the transport side by Peter Newton as well as by Joan Newton to whom she spoke every day. It appeared that in addition to Mrs Armer’s son Henry, Ann Kirkwood and the Newtons’ daughter, Sarah, had also been charged with conspiracy but proceedings had been dropped against them in return for the 3 Guilty pleas. As a result of the prosecution it appeared that Cumbria County Council had taken £4 million from them which was held in trust so that they were not allowed access to it (although it was disputed that the Council was entitled to even £1 to £2 million). She therefore relied for income on other rented properties including a cinema and a nightclub, and a commercial hire business owned by her husband and herself. She confirmed that Ann Kirkwood dealt with all the wages so that, when asked by the Traffic Commissioner, she herself did not know what everybody earned. She also confirmed that Mrs Newton left Bookers at 4 pm and then went to the yard at KHJ Limited from which she had a lift home from her husband.
(viii)	Mrs Newton gave evidence that she had worked at the Appellant company as Transport Manager since 2002 but that her  husband had worked there since 1994/5 and her daughter from 1989 when she had been 16. The previous Transport Manager had been Peter Earley and when he had left she and her husband had helped the Armers, who were their friends,  she by being their Transport Manager although she was also working at Bookers for 18 hours a week. She stated that although she had said on the application form when she had joined CAW Limited that she was also Transport Manager at her own business in fact, on reflection, that business had ceased around that time. She had finished at Bookers at 12.30 and had then gone to CAW Limited at 1 o’clock and remained until about 5.30 pm waiting for the lift with her husband as she did not drive. After 2004 when she had increased her hours at Bookers, she had left Bookers at 4 pm and CAW at 5.30-6 pm. Originally she had checked defect notices and tachograph charts but after the changes in 2008 she had continued to work as Transport Manager. She also sometimes went into the yard on Saturday morning when going to the supermarket but there was “not much work to do there now”. She stated that she was not paid for her Transport Manager’s work of about 10-12 hours per week (but that her husband received £500 per week). She confirmed that she had been at the yard when VE Hirons conducted his unannounced visit but that as she was not full time this was coincidence on that occasion, as while her husband had been in prison she had not kept the same regular hours, but “struggled to get there” although she sometimes had a lift from David Jordan, the mechanic.
(ix)	The Traffic Commissioner had considered the signed witness statement dated 21 October 2009 of Peter Newton in which he stated that he was currently employed by KHJ Limited as manager, having worked there since 1994, and that he wished to acquire a CPC so that he could be nominated as Transport Manager.
(x)	Submissions from Mr Newman referred the Traffic Commissioner to the Appellant Company’s excellent maintenance facilities, the satisfactory maintenance investigation, the fact that Mrs Armer had indeed had very quickly to learn how to run the company, but conceded that the Traffic Commissioner had not been told about the conviction, the resignation of the Director or the full time employment of Mrs Newton elsewhere. He did, however, submit that the 10-12 hours per week which Mrs Newton worked for the Appellant company was sufficient for 4 vehicles and that it had been Mrs Newton who had signed the form for the new operating centre application in 2008 when the Appellant company had moved operating centres within Barrow-in-Furness. He did, nevertheless, also concede that since 2001 there had not been an effective Transport Manager for the larger business prior to the sale, which had originally been for £13 million, but this had fallen through following the prosecutions and the much lower figure of £4 million had been obtained.
(xi)	At the close of the public inquiry the Traffic Commissioner reserved her decision.  One week after the public inquiry the Traffic Commissioner had received a letter from Mrs Newton reminding her that Mrs Newton had not been involved in the prosecutions, that Mr Armer would have no involvement in the business following his release under the “tagging” system and that it was intended to put David Jordan, the mechanic, forward as Transport Manager. She also queried why her repute was being questioned when other Transport Managers also had multiple jobs. The Traffic Commissioner reserved her Decision.
(xii)	The Traffic Commissioner found that there had been
(a)	a failure to notify her of the Transport Manager’s two employment situation and changes in it.
(b)	There had been very serious dishonesty convictions of 3 key individuals in the Appellant operator company involving significant breach of trust against a local authority with a direct impact on Cumbria Council tax payers involving false documents and the authorised vehicles, and that these convictions and the resulting prison sentences had never been declared to the Traffic Commissioner.
(c)	Following these sentences there was no one in charge of the business as Mrs Armer was “learning on the job” and had other responsibilities taking up her time.
(d)	There had been no culture change following the convictions and prison sentences. Mr Newton was still being put forward as manager (and as Transport Manager despite his present lack of CPC) and it was apparent that Mrs Armer and Mrs Newton did not accept their husband’s very serious wrongdoing, instead rationalising their pleading Guilty as a plea bargain to prevent other family members and Ann Kirkwood, the Company Secretary, from being prosecuted. Subsequently even the mechanic was put forward as Transport Manager rather than any attempt being made to propose the most appropriate person: indeed the company’s representative Mr Newman accepted in submission that there had been no proper arrangements for an effective Transport Manager to be in place since 2001 when Mr Earley had left and even submitted that Mr Armer would be re-employed on his release from prison.
(xiii)	The Traffic Commissioner had then taken into account the positive factors of satisfactory maintenance and condition of the vehicles and the excellent facilities and balanced them against the very serious fraud and apparent lack of change of culture. She concluded that the offences were “so serious that it is entirely right that the company should no longer be allowed to operate commercial vehicles”. She found that the Armers and Mrs Newton had lost their repute and revoked the licence as set out in paragraph 1 above, further disqualifying the operator company for 5 years.
3.	The Appellant company then appealed against the revocation and disqualification on the grounds that the Traffic Commissioner had made “a mistake about the law”, and “about the evidence” and had taken into account “some matter which should not have been taken into account, or failed to take into account some matter which should have been”.
4.	At the hearing of the appeal the Appellant company was no longer  represented by solicitors, but by Mr and Mrs Armer. Mrs Armer, who had signed the Notice of Appeal, had also included a typewritten statement with the appeal papers in which she stressed that the 3 key individuals who had been convicted had only pleaded Guilty as a result of being “emotionally bullied” so that the case against them had actually been heard; and that the part of the business involved in the fraud was only 30% of the operation. The Appellant company was still in negotiations with Cumbria County Council and “that if there was any over-charging the company will pay this back”. With regard to Mrs Newton, Mrs Armer had stated that it was strongly disputed that Mrs Newton was not carrying out her Transport Manager’s duties, as she was present 10-12 hours per week and there was evidence from the drivers that she played an active role in the company. A number of testimonials to this effect were attached to the Notice of Appeal, together with a supportive reference from Renault Trucks and another from Mrs Armer’s solicitors in respect of her application to run a vehicle testing centre.
5.	Mrs Newton had also sent a written statement in which she reiterated her commitment to her position as Transport Manager, stating that she believed that since she had taken over from Peter Early in 2001, “the maintenance and day to day running of the vehicles has dramatically improved”. She pointed out that she had been present in the office at the unannounced VOSA visit, the report of which had been “satisfactory” and had not included any advisories. She disputed the Traffic Commissioner’s conclusion that her presence was “just a coincidence”, and did not accept the Traffic Commissioner’s concerns that she had another job as well as her position at the Appellant company, reiterating that this had been disclosed in 2001, that nothing had been said when she had decreased her hours in 2004 when her own operator licence for P&J Transport had ended, replacing those hours at Bookers, where her work had nothing to do with her position at KHJ Limited “as confirmed by the VOSA inspector” on the unannounced visit. She added that she had been offered a paid position as Transport Manager by the Appellant company in 2001 but had declined to be paid and that this was her decision to make.
6.	In oral submissions Mr Armer referred us to this statement by Mrs Newton, confirming that, while he agreed that the Company might have been slow in reporting the convictions and his resignation as a Director, Mrs Armer had taken over his role and Mrs Newton had been there helping her as well as performing her own Transport Manager’s role. He said that his wife had done what was needed and had in effect had a monitoring role as everything (including salaries and wages) had been structured by himself a long time before (so there was no need for Mrs Armer to know what everyone was paid, as had been suggested by the Traffic Commissioner if she was really managing the business while her husband was in prison, since this was already settled and routinely dealt with by Ann Kirkwood). He added that the licence was needed to run the 4 vehicles including tippers required to move the company’s own plant, and that 4 vehicles did not warrant a full time Transport Manager, which was demonstrated by everything within Mrs Newton’s remit being in order, with an above average annual test rate. He disputed the necessity for the disqualification as the Appellant company was now in a position to take advantage of a second chance, having “done time” and realised the error of its ways. He said that Barrow-in-Furness was a depressed area and he wanted to save everyone’s jobs.
7.	We reserved our decision.
8.	This is clearly a very bad case involving a significant fraud involving extremely distasteful offences of dishonesty against a local authority and actual falsification of documents in connection with the use of authorised vehicles. The Traffic Commissioner could not in any circumstances be expected to overlook this conduct which goes to the heart of the relationship of trust between the Traffic Commissioner and the operator. The fraud alone, involving 3 key individuals in the Appellant company, was clearly enough for revocation for lack of repute and for the Traffic Commissioner’s concerns about the likelihood of future compliance, when it was actively submitted that the same individuals would again be working within the company (which appeared to be reinforced by the fact that although Mrs Armer accompanied him,  Mr Armer led the appeal hearing). The failure to declare material changes was also a clear concern as the Traffic Commissioner relies on such open co-operation from operators and if they cannot be trusted to be honest and proactive in observing obligations of the licence it is hardly indicative of a future likelihood to report routine material changes. We consider the revocation was richly deserved. The Traffic Commissioner took the positive factors into account and not surprisingly concluded that they did not outweigh the significant fraud and culture of dishonesty.
9.	We are not surprised by the disqualification. A clear break with the past is required here, since the past is very unsatisfactory. If Mrs Armer wishes to continue in business with her son then she has the opportunity to make a fresh application if and when she can demonstrate that she and her son are capable of running a compliant operation. The Traffic Commissioner has already determined that any other operation linked with the revoked licence should be heard at public inquiry in any case. Accordingly if Mrs Armer has sufficient support, from drivers who have worked for the Appellant company, from local motor trade which has respect for the Appellant company’s maintenance operations, and from her long-standing solicitors, Livingstons (which apparently did not represent the Appellant company at the recent public inquiry but sent in a supportive letter) she can no doubt set out to re-establish her personal repute which the Traffic Commissioner has currently declared lost. However in order to do this she would have to show the necessary clean break with the past and with all the individuals who have contributed to the present situation in which all those convicted and imprisoned have so far unwisely been presented as returning to the business as if nothing had happened: this clearly sends an unacceptable message of no change of culture.
10.	We note that there is no appeal against the finding of loss of repute of Mrs Newton as Transport Manager. We have not had the same opportunity as the Traffic Commissioner to see and hear Mrs Newton in person but will only observe that there is no absolute rule that we know of that requires a Transport Manager not to work “full time” hours (or close to such hours) elsewhere in whatever capacity s/he chooses as well as to discharge a hands on Transport Manager’s role in further hours. The key requirement of the operator licensing legislation is to perform the tasks expected of a Transport Manager so that there is actual and effective control. It does appear to us that most recently Mrs Newton did this. She checked defect books and tachographs, selected samples for external analysis and achieved a satisfactory VOSA report, besides being routinely in the office when the Vehicle Examiner made an unannounced visit, despite the difficulty in arranging transport when she could no longer get a lift to work with her husband while he was in prison. The fact that she declined payment for these services is unusual but not fatal, especially as it was said she routinely worked without payment for charity and the Armers were her friends, who paid her husband for his work at a substantive rather than nominal rate. During Mr Armer’s imprisonment Mrs Newton’s presence every day must have been a significant plus for Mrs Armer. If she worked 10-12 hours a week (including some Saturday mornings) this was a time commitment in excess of many part time Transport Managers’. Accordingly while we are not asked to set aside Mrs Newton’s loss of repute we are of the view that it should not be difficult for her to regain it, since if there was a period when she might not have been an effective Transport Manager this was probably between 2004 when she gave up her own company, P&J Transport, and increased her hours at Bookers, and 2008 when the former CAW Limited was sold, since which date she appears to have committed enough time to KHJ Limited to ensure the satisfactory operation of 4 vehicles, and her results speak for themselves.
11.	Accordingly we dismiss the appeal and direct that the orders of the Traffic Commissioner shall come into effect at 23.59 hours on Sunday 16 May 2010.

Frances Burton
Judge of the Upper Tribunal
7 April 2010